One aspect of risk management typically involves consideration of one or more criteria which are correlated to an event or events of interest. The ability to predict the frequency or eventual likelihood of occurrence of events of interest has value and utility in many settings.
It is often the case that different entities may use different sets of criteria to predict the expected occurrence of the same (or similar) events. In some cases, the same entity may also use different criteria sets in differing situations or differing times. Methods and systems for comparing different criteria sets are useful tools in the selection of criteria and the design and development of related products.
These considerations are applicable in the marketplace for financial products and services. This is particularly true in the field of insurance. The following discussion deals particularly with applications of such methods and systems in the field of life insurance. However, in its broader aspects, the methods and systems disclosed are applicable to other types of insurance, and to other financial products which involve risk management (e.g., pricing and evaluation of different sets of criteria that might be used in the design and development of property insurance, mortgages, credit, securities, etc.).
Life (and health) insurance products are continuously evolving. A relatively recent trend in the field of life insurance has been the increased emergence of “preferred” products. These are products regarding which the mortality expectations are lower than the expectations for “standard lives” (i.e., the average mortality expectations for a healthy population). Insurance companies provide preferred products to those individuals and/or groups which can meet selected criteria considered indicative of low mortality.
As noted, it is not uncommon for different entities (i.e., insurance companies) to use different criteria sets to identify those available for preferred coverages, and/or different cut-points for designating the levels of one or more criteria associated with preferred mortality. Thus, comparing the products from competing companies, or designing new preferred products to replace or augment existing products, can be difficult without use of a methodology which takes such differences into account. Such comparisons may be especially useful in the selection of criteria and pricing of related products, and in determining the impact of criteria changes or granting various exceptions to criteria on pricing and potential profitability of such products.
In its broader aspects, certain embodiments of the present invention are directed to computerized methods and systems of characterizing relative risks, such as mortality risks, for a plurality of financial products, such as preferred insurance products. One or more of these embodiments may include the steps of identifying one or more risk classes associated with the plurality of products; determining for each of the risk classes an expected occurrence rate; dividing the expected rates by an average rate for standard risks to determine a relative risk ratio for each of the risk classes; and comparing the relative risk ratios to characterize the relative risks associated with the plurality of products.
Additional aspects and features will become apparent to those skilled in the art upon consideration of the following detailed description of the illustrated embodiments exemplifying the best mode of carrying out the invention as presently perceived, and the claims which follow the detailed description.